Key Issues

Trade financing and the role of regional financial institutions in promoting

South-South trade and investment

Objectives:

Examine whether, and to what extent, regional arrangements can promote stable links between trade, finance and inclusive development.

Discuss how to improve the provision of trade credit in the current context of global risk aversion and tight financial markets, focusing, in particular, on the potential contribution of regional banks.

Highlight the specific problems of trade finance in the context of international (and, specifically, regional) value chains.

Share and discuss the experiences of the existing and emerging Southern development banks.

The meeting will be structured around four sessions:

I. Regional arrangements to promote trade and development

The global financial crisis began in the United States in 2007, spread rapidly around the world, and continues to hold back growth prospects in many countries. The severity of the crisis has raised serious questions about the effectiveness of the international financial system, including its ability to provide a stable environment for international trade.

Trade flows have been particularly volatile over the past few years, and there are concerns that export-led growth strategies that have relied on final markets in advanced economies are losing their relevance for many developing countries.

In response, many countries have turned to regional arrangements as a possible means of strengthening the links between trade, finance and development. Partly as a consequence of these new arrangements, there has been considerable debate about how best to combine multilateral and regional structures in support of sustainable and inclusive development paths.

The introductory session of the Expert Meeting will examine some of the most relevant issues in this regard, including the following:

Is the regional setting better suited to building sustainable links between trade, finance and development?

What are the financial arrangements that must be in place to advance integration at the regional level?

What have we learnt about such arrangements from recent experiences in the South and the North?

II. Trade finance

The financial turbulence and the worldwide liquidity contraction which followed the collapse of Lehman Brothers affected the trade finance available to developing countries. Although trade finance is generally at the low-risk, high-collateral end of the credit spectrum, this did not insulate it from the crunch, especially in developing and low-income countries.

The second session of the Expert Meeting will discuss ways to facilitate the supply of trade credit in a global context of risk aversion and tight financial markets.

The contribution to trade financing by regional financial banks, including for counter cyclical lending

How to encourage resource-pooling and co-financing between the various providers of trade finance

The role of central banks as foreign currency providers

III. Financing international value chains

In the last two decades, advances in information and communications technology, coupled with a gradual reduction in policy-driven trade barriers, have allowed the production process to be "sliced up" into discrete economic steps and separated geographically.

This has provided new trading opportunities for developing countries, including in more dynamic products. However, value chains do not eliminate the financing constraint on development; small and medium-sized firms continue to face a series of constraints on effective participation in these chains, and the scarcity of trade finance could disrupt many supply chain operations, and even slow down world trade and output growth.

The third session of the Expert Meeting will focus on the issue of financing trade in the context of international value chains.

Access to finance in the context of value chains: successful regional experiences

The role of regional development banks in promoting international value chains

Scaling up value chains through South-South integration and cooperation

IV: Southern development banks

Regional development banks are well positioned to deal with the uncertainty of long-term, large-scale strategic projects and can help developing countries to overcome critical limitations in credit provision, including trade credit. However, in recent years, and partly in response to perceived weaknesses in existing arrangements, new South-South financing mechanisms have begun to emerge.

The Banco del Sur (Bank of the South), established in 2009 by the Governments of Argentina, the Plurinational State of Bolivia, Brazil, Ecuador, Paraguay, Uruguay and the Bolivarian Republic of Venezuela, represents a vivid example of this strategy, since it aims to finance infrastructure projects and support regional integration.

Along the same lines, but not constrained to the regional level, the BRICS recently envisaged the creation of a bank in order to mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries.

The last session of the Expert Meeting will focus on:

Regional experiences with Southern development banks: lessons learnt

Banco del Sur: history, project and challenges ahead

The BRICS development bank: perspectives for the future

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Inputs from experts

Experts nominated by member States are encouraged to submit brief papers (approximately five pages) as contributions to the work of the meeting. The papers should be submitted to the UNCTAD secretariat in advance of the meeting.

The papers will be made available at the meeting in the form and language in which they are received.